Egypt Construction

Muted levels of construction activity since the 2011 revolution, combined with constraints on electricity supply, has stifled operating conditions for Egypt’s cement producers, though new projects scheduled to launch in the second half of 2014 could provide a helpful boost to the segment, recently buoyed by the successful IPO of Arabian Cement.

After several years of strong demand growth, the economic slowdown and investment uncertainty associated with the 2011 revolution and its aftermath have dampened steel consumption in Egypt, leaving potential supply above demand. This gap partly explains the government’s decision to impose import tariffs, the rationale being that Egypt should not need imports if its domestic supply outstrips its own needs. For steel consumers, however, it is not necessarily that simple. They feel they should be free to import cheaper foreign products.

Even amidst the ongoing unrest in Cairo and a sliding benchmark index, Egypt’s medium-term economic outlook has begun to offer improved prospects, particularly in light of increased activity in key industries. Recent strong demand, particularly for housing, along with growing infrastructure needs, is set to see a medium-term recovery in Egypt’s construction sector. While a slowdown in 2011 hindered progress and has negatively impacted capital flows, work is continuing on existing projects and major deals continue to be signed.